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www.swingtum.com/institute/IWIF3 Proc IWIF-II, 2007, Chengdu Introduction Minority Game (MG) – The model by D. Challet and Y. C. Zhang in 1997 Successful and simple model of Financial Market which states that the minority choices will win One of the main concern for investors: negative-sum (MG) VS positive-sum (Real market) ?

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www.swingtum.com/institute/IWIF4 Proc IWIF-II, 2007, Chengdu To include more realistic aspects … 1. What modifications are we making? 2. What important aspects of real markets should be added to capture basic features? 3. Negative sum? Positive sum? Zero sum? 4. Can we apply these financial models on real financial data ?

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www.swingtum.com/institute/IWIF17 Proc IWIF-II, 2007, Chengdu Trendsetter state Arbitrageur state VS Periodic with characteristic pattern Period much longer than period 2 !! What are they doing?

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www.swingtum.com/institute/IWIF18 Proc IWIF-II, 2007, Chengdu Trendsetter state Start to sell !! (Set up the downward trend) Follow the trend !! I was late... Trend setters (winners) Trend followers (winners) Late followers (losers) Depend on strategies, eg: buy/sell/hold …. We didnt teach them to set up and follow trend !! But they do it !!!

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www.swingtum.com/institute/IWIF22 Proc IWIF-II, 2007, Chengdu Positive-sum? Where does the money come from? Note: Supply and Demand is not balanced in this model There is a Market Maker behind the game Market Maker is clearing the extra supply and demand (doing opposite as the actual agents do) So, agents gain, Market Maker loses All together ~> zero sum Market Maker ?

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www.swingtum.com/institute/IWIF23 Proc IWIF-II, 2007, Chengdu No Market Maker, supply and demand have to be balanced ~> when one agent is holding a buying position, someone else must be holding a selling position ~> zero-sum for agents Can both Agents and Market Maker gain? Transaction cost + evolution of agents (agents losing money are leaving the market)

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www.swingtum.com/institute/IWIF29 Proc IWIF-II, 2007, Chengdu Comparison with other models - % of gaining agents 11% of agents in this model Beat HSI inflation in this 20 years

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www.swingtum.com/institute/IWIF30 Proc IWIF-II, 2007, Chengdu Wealth Game has the largest % of gaining agents But for the best investor……. Wealth GameMinority Game x 7.5 times x 17 times x 25 times x 7.5 times Minority Game has more outstanding best investor !

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www.swingtum.com/institute/IWIF32 Proc IWIF-II, 2007, Chengdu Wealth Game Vs Minority Game Another similar test : Wealth independent Max Pos. with w(0) = 0 Best investors are more outstanding Most agents are losing Best investors are not as rich as MG, but most are gaining